Facebook’s Libra Uses Bitcoin and Ethereum as Stepping Stones to Take Over Banks
Ever since Facebook announced its upcoming cryptocurrency,
tech geeks have been curious to get their hands on the whitepaper to know more
about this thrilling project. Recently, Facebook ended the anxiety by rolling
out a 29 pager, explicitly showing off the talent onboard and making an
electrifying entry in the crypto niche.
Of course, the paper also aims at explaining the protocol
behind the venture and discusses the goal of its launch as well, which
evidently favors low volatility and ability to offer extreme efficiency while
connecting billions of people.
It is worth mentioning that the whitepaper loudly talks about
decentralization and in order to defend the stance, Facebook has established a
new organization, the Libra Association. The core members of this organization
will have certain privileges (e.g. tokens) to govern the network and reach
I know you might have developed some concerns after reading
the last paragraph, but please be advised that the blockchain technical lead at
Facebook clarified that with the passage of time, the decision making power
will gradually shift from a few selected members to the entire network. So in
the long run, it is definitely going to be an ‘utterly decentralized’ project.
After the crypto hype in 2017, we saw many ICOs and other
ventures covering a variety of use cases in order to serve a larger audience.
However, as Libra’s whitepaper mentions, this cryptocurrency is specifically
aimed at making financial transactions more efficient. It also goes on to
praise Facebook’s efforts to prosper the science behind decentralized
Of course, the social media giant is after ‘something big’
and therefore, it has announced a programming language, called Move, to
interact (programmatically) with the chain. In other words, you need to learn
this language in order to write smart contracts on Libra’s blockchain.
It is worth mentioning that Facebook has not created a
‘unique’ solution. In fact, they are quite vocal about it and their actions
also prove that the plan is to use the most robust concepts and procedures from
a variety of existing chains.
One of the major motives for rolling out the BTC was to
anonymize the real World identities of its users. Your public and private keys
happen to be the only references pointing towards your wallet. Libra follows
pretty much the same procedure and hence, allows its participants to have
multiple accounts as well. Therefore, even if you run 10 accounts on Libra’s
blockchain, there will be no connection between them since your ‘real’ ID is
hidden and every wallet will operate as a standalone instance.
ETH’s programmable currency
At various points, the whitepaper advocates about the extent
of liberty provided to the developers and other entrepreneurs who want to build
their use cases on top of Libra. It also allows you to create a replica of the
blockchain, without voting permissions, of course. This concept is exclusively
derived from Ethereum and the creators were also inclined towards introducing a
fee (aka gas) for the execution of transactions. This is vital for running and
scaling the blockchain.
However, it’s not entirely the same and Libra has made two
- They have not fully revealed the list of features or
rather ‘extent of customization’ that the developers can leverage on the
platform. It implies that the Libra Association somehow wants to restrict the
community in its initial stages
- A smart contract can be pointed towards any set of
resources or rather assets on the blockchain. It makes things easier for
everyone and facilitates collaboration
ETH’s Proof of Stake
Libra’s whitepaper also mentions that in the long run,
memberships will be awarded after considering stakes of the users. It also goes
on to discourage the approach used by Bitcoin’s PoW algorithm which is highly
inefficient in terms of energy consumption and performance.
Hyperledger’s permissioned nature
In the last year, we have seen how rapidly Hyperledger’s
acceptance has advanced in the industry and the primary marketing point for
them is the chain’s permissioned nature. It is quite evident that in order to
propel things in the beginning, Libra is also keen to adopt such a model. The
initial consensus algorithm would take input from multiple organizations
running full nodes on the network. As soon as the voting process ends, a leader
will be selected at random to count the votes and add the new block.
It is worth mentioning that in its early days, Libra is more interested to ‘handpick’ the trusted members for reaching a consensus, rather than implementing a democratic procedure. The whitepaper states that since all of the founding members of the association happen to be trusted names in the industry (e.g. eBay, Lyft, Mastercard, etc.) it is highly unlikely that they would act ‘unethically.’
Tezos’s on-chain governance
Since Libra’s founding members possess respective investment
tokens, they happen to be the only ones eligible to participate in any voting
event. As you must have understood by now, only they can implement a change or
add new members in the foundation. However, it must be noted that even though
this governance model will be coded initially, the foundation plans to make it
more generic in the long run.
In 2018, we saw that the tokens which burnt a specific
circulating supply became incredibly popular and Binance’s native coin happens
to be one of them.
However, it is worth noticing that Binance used it as a
strategy to surge the value of its coin, but Libra does not plan to burn the
tokens for this purpose. In fact, they would do this for catering to the shifts
From what we have discussed in the light of Libra’s
whitepaper, it is quite evident that the venture is aimed at facilitating the
potential users who are either underbanked or are affected by the ‘greedy’
nature of centralized banks.
It seems quite a decent move that the core team decided to
strengthen the existing models in order to yield the best results for the end
consumers. It is no secret that cryptocurrencies, like the BTC, allowed people
to be a part of International transactions and enjoy efficiency at practically
‘zero’ cost. Given the influence of Facebook, the launch of Libra may open a
plethora of doors and eventually, haunt the banking industry as well.
However, in order to hit that level, the association needs to work tirelessly, as there are still a couple of undecided matters. For instance, the whitepaper accepts that when the network scales up in the near future, the storage would become a huge concern. However, it has not pointed out a strategy for storing the data.
Featured image via BigStock.